Retirees falling through financial advice cracks: Chant West

Chant West’s General Manager, Ian Fryer, has urged superannuation funds to provide more affordable and accessible financial advice services for retirees, noting a growing advice gap where the majority of retirees fall through the cracks.

According to Fryer, this “missing middle” gap consists of Australians who seek more than simple advice but are unable to afford ‘comprehensive’ financial planning services. He said a significant number of retirees fall into this category, as they require guidance on several topics including how they should invest their super, how much they can draw down and how long their savings will last.

“The primary purpose of super is to provide income during retirement. Super funds need to do more to assist members in transitioning from the accumulation phase to the decumulation phase, where they draw down their savings,” he said.

“Given that the optimal outcome will depend on each member’s situation, they need tailored financial advice. Indeed, the best way to deal with retirement planning is through financial advice. To get tailored advice, it might cost about $5,000. But many super fund members would not want to or be unable to pay this much. This highlights the cost barrier preventing many members from accessing advice.

“There is some intra-fund advice offered by super funds, which is helpful in answering single-issue questions during the accumulation phase, but someone moving into retirement needs more than this.”

Fryer noted that certain super funds have begun to address this lack of broad advice opportunities for members, but emphasises that a focus on growing capabilities in digital advice will have the most positive impact.

“With Australian Retirement Trust and Aware Super, for example, members can get advice to help them understand how much they can draw down and how long their money is going to last, and those super funds offer that for free,” Fryer said.

“Telstra Super goes one step further and says ‘Look, we can help you answer that question, and we can take into account a couple of other things like how much you’re likely to get as a household including the age pension’, based on a member’s financial details and that of their spouse. And they charge a fee of as low as $800 for a couple.

“Russell offers a similar service where a reasonably simple retirement plan, including age pension requirements and a spouse’s needs, can be provided for a slightly lower fee. But many super funds don’t offer this.

“Digital advice is one way that we can help members answer the critical retirement planning questions. An individual could enter some personal financial information into an online advice tool which produces a recommendation based on those inputs.

“Ultimately, we want to get a stage where if you’re in a certain cohort and you get to retirement, a fund might say ‘Based on what we know about you, here’s what we suggest and if you want to implement this change, just click this button’. Or if you want to talk with someone about it, call this number to speak with one of our advisers.”